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N.Y. Real-Estate Developer Pleads Guilty to Mortgage Fraud

By

Joan E. Solsman

Oct. 15, 2010 3:58 p.m. ET

A New York real-estate developer pleaded guilty to defrauding Washington Mutual, now a part of
J.P. Morgan Chase
& Co., and a subsidiary of
Credit Suisse Group
as part of a $92 million mortgage scheme, according to the Justice Department.

Thomas Kontogiannis
pleaded guilty to conspiracy to commit bank and wire fraud in federal court in Brooklyn Friday. The charges were connected two New York developments, one in Brooklyn and one in Queens.

U.S. Attorney Loretta E. Lynch called the mortgage fraud "staggering" in its scope. New York Superintendent of Banks Richard H. Neiman said it was "one of the largest mortgage frauds directed by a single individual."

Mr. Kontogiannis's indictment said he had family and workers who acted as straw buyers on properties he owned and directed false loan files. The mortgages included false appraisals and other documentation. After the loans closed, Mr. Kontogiannis prevented the mortgages and deeds from being recorded, so he could sell the same property repeatedly. He eventually sold the loans to Washington Mutual or the Credit Suisse unit, DLJ Mortgage Capital Inc., according to the charges.

Mr. Kontogiannis was indicted in June 2009, along with eight others. His guilty plea is the fifth in the case. He faces as much as 30 years in prison for the conspiracy count. He also has agreed to forfeit proceeds from the alleged fraud, including a criminal forfeiture money judgment and money traceable to four commercial properties he controlled valued at at least $50 million.